California Gov. Signs Pot Banking, Appellations Bills Into Law

California cannabis advocates applauded Gov. Gavin Newsom (D) for a series of pot-related bills he recently signed into law. At least one prominent industry backer suggested the moves could foreshadow major changes on the federal level.

Newsom, who governs the nation’s largest legal marijuana market, signed five cannabis-related bills ahead of Wednesday’s deadline. Among the new laws set to go into effect Jan. 1 is a bill (AB 1525) that removes state penalties and offers privacy protections for financial institutions that do business with the cannabis industry. Newsom also signed a bill (SB 67) aimed at preventing businesses from misrepresenting a product’s origin, establishing an appellations program similar to those used in the wine industry. 

Ryan C. Bacchas, president of the California Cannabis Coalition, said the bills were a step forward for the state and sent a message to the federal government and other states. 

“As California goes, the world goes,” Bacchas said. “This was our [governor] making a statement that we’re going this way, so this is the way that you better start getting in line with.”

Take it to the bank

The new banking law was developed to make traditional banks accessible to cannabis operators. Many businesses in the industry can’t use federally-backed banks or participate in commercial loan programs due to marijuana’s federal illegality.

The new California law states that an entity that provides financial services to a person or business involved in the commercial cannabis industry is not committing a crime by doing so. It further allows for cannabis operators to have the state share their licensing information with banks for the purposes of facilitating financial services.

Dale Gieringer, director of California NORML, said the potential impact of the law was difficult to immediately gauge.

“It’s about the best the state can do,” he said. “It’s not clear how much this is going to change the situation, since it’s really federal law that has been the real obstacle here and remains the big obstacle.”

Bacchas was more bullish on the legislation. He said he was particularly pleased that it stipulates that cannabis licensee information will only be shared with financial institutions – rather than the federal government, for example – and that a licensee can withdraw permission to have their information shared. 

The inclusion of that latter stipulation was encouraged by the United Cannabis Business Association, which advocates on behalf of the industry.

Bacchas cited recent scandals involving national and international banks and suggested that more California consumers were already turning to locally or privately owned credit unions and other financial institutions. He said this new law should provide peace of mind for California cannabis operators.

It could also impact the federal banking laws, he said. 

This month, Congress included a SAFE Banking Act – which would allow federally backed banks to work with marijuana entities – in its latest coronavirus relief package, but that proposal is expected to face an uphill battle in the Senate. 

Bacchas said he was confident California could be used as an example for reform.

“[This law] is sending a clear statement to the federal level that we need to change our banking policies, specifically for this newly legalized market,” he said. “This made a clear national and international statement … that we are going to change it here and we’re going to make sure that it changes nationally.”

Moving forward

Thanks to Newsom signing AB 67, the state will also establish a first-ever cannabis appellations program. An appellation is a geographical name – usually a region, vineyard or county – commonly used by winegrowers to identify and market particular wines.

The new California law aims to stop companies from claiming that products are from an area they actually aren’t from. Some brands have marketed products as being from Humboldt County, for example, without being from there.

Bacchas said the law is important both for protecting consumers and honest cultivators, who could be negatively impacted by competitors false claims.

“We need to make sure this is in place for our craft cannabis [companies], especially in places like the Emerald Triangle,” he said, referring to the largest cannabis-producing region in the U.S., which includes Humboldt County.

Other bills signed by Newsom include AB 1872, which will suspend the state’s ability to raise cannabis cultivation taxes and mark-up rates for a year; AB 1458, which provides wiggle room for edible manufacturers by raising the variance of THC allowed in retail products by 2%; and SB 1244, which allows cannabis testing labs to test products from law enforcement and regulatory agencies. Under current law, testing labs are only permitted to work with state cannabis licensees. 

Newsom vetoed two other bills, one related to testing and one aimed at dissolving the state’s Bureau of Cannabis Control. He indicated the issues highlighted in those bills will be addressed next year as the state continues to modify and/or consolidate its cannabis regulatory bodies.

Bacchas said the new laws should improve the state’s cannabis market in 2021 and beyond.

“Despite a pandemic, the community stepped up, the governor heard us, and we’re going to be able to move forward into this whole decade, but next year particularly, on the best foot that we’ve had since legalization started,” he said.